This is a blog by a former CEO of a large Boston hospital to share thoughts about negotiation theory and practice, leadership training and mentoring, and teaching.

Monday, January 28, 2008

Seeking hospital frequent fliers

This came in today's email. Say what you want about hospital advertising, this has to be the strangest thing yet -- a frequent flier program for hospital purchases! I quote it exactly: I couldn't make this up. Your thoughts?

Orlando, FL - January 28, 2008 - Paquin Healthcare Companies, Inc. today announced the launch of its new hospital-based customer loyalty program. The program, referred to as My Healthy Rewards, is a way of rewarding hospital's customers for using their products and services and engaging in wellness activities.

"We are pleased to announce the availability of My Healthy Rewards. This loyalty program will play a vital role in the success of any comprehensive healthcare retail strategy by increasing customer loyalty and repeat sales," said Tony Paquin, founder and CEO of Paquin Healthcare Companies, Inc.

My Healthy Rewards members can accumulate reward points based on their retail purchases, utilization of hospital or clinical services, or other healthcare related or wellness activities. As reward points accrue, members may receive award certificates, special offers, merchandise discounts and special sale notifications. There is no limit-the more consumers shop, the more they earn.

The loyalty program is just one part of a consumer healthcare strategy that enables hospitals to promote their brand and provide excellent service.

Proceeds from healthcare system retail outlets provide financial support for the development of high quality healthcare in their communities. This program enables members to contribute to the well-being of their communities by using their rewards card when shopping for healthcare products and services.

The company announced that the program will initially be deployed at 27 hospitals locations and is expected to generate at least 500,000 members in its first year.

Let's assume good intentions from Paquin. Creating new sources of unrestricted, high margin, non-clinical revenue for BIDMC without any new expenses or risk would probably garner initial interest from BIDMC's revenue managers, maybe even from the CEO. However, before presenting any retail medicine options as specific as Paquin's loyalty/private label program pitched by email, a discovery process that included all the key stakeholders and assumed a lengthy decision making timeline would be in order.

For BIDMC, my guess is the private label vitamin/supplements/product option would be a guaranteed non-starter (in spite of the fact that Harvard Medical Multivitamins could be a bestseller) and the patient purchase tracking information would have incremental IT costs associated with complex issues that surround patient data privacy which would result in a quick CIO veto.

However, not every hospital would have the same concerns, especially a hospital or healthcare system serving a much smaller, tight-knit community that has no academic or religious affiliations and -I mean this in the kindest terms - less brand equity than BIDMC. A healthcare provider loyalty/private label program might be percieved in the same light as kids raising money for school sports, arts or travel programs.

I'm impressed at Paquin's email marketing skills - they made it past your spam filter. What retail medicine programs would make sense to the team at BIDMC?

Thanks, Tom. I'm hard pressed to imagine that we would want any, but maybe I am just being narrow-minded. The last impression we would want to give is that we are promoting unnecessary use of the health care system. Also, I really can't imagine this mechanism as one that would gain market share -- or even make existing patients feel better about their hospitalization.

If patients want purchases to benefit an affinity group or get "miles", they can purchase retail items from our gift shop or pay for clinical services using their favorite affinity or frequent flier credit card. That opportunity is open to them now. If we wanted, we could just ask the Mastercard or VISA people to establish an affinity card in our name, like other charities have done. But, the idea of maintaining our own data base for this kind of frequent flier program just feels wrong to me: Too much chance for improper use of private information and creation of weird incentives for people involved in the program.

I was thinking the same thing - that this would only cause some degree of increased utilization where we have too much already. Especially if one possesses healthy insurance coverage, we would see the risk of moral hazard (i.e. I have coverage, so why not use it, regardless if I really need the service or not).

While this might encourage some to get those preventative checkups, screenings, etc., I think on the whole the lure of "gifts" is not enough to make those who are generally uninterested in their health become believers in preventative medicine.

I wonder if the fine print of the "rewards" program disqualifies the participant from gaining points if their purchase was the result of a potentially preventable readmission, or only awards half points for preventable complications. Promoting hospital quality and safety, one consumer perk at a time!

I have to agree with your assessment that a program like this would just be promoting more frequent use of the healthcare system. Having a “points” program might draw the line between where a product/service is available (or seems to be at least) for the customer/patient and when the product/service is there solely for profit. As a non-profit institution meant to serve the Greater Boston community, this program seems like it would go against our mission of providing “personalized, excellent care for our patients,” whereas we would be encouraging loyalty based on a marketing ploy as oppose to developing loyalty through outstanding service.

Also, programs similar to this for credit cards have been somewhat controversial because they coheres consumers to use their credit cards when unnecessary, bringing them further into debt. Again, going along with what you said in your last comment, if someone has something to gain by having a not-completely-necessary procedure done, the incentive such as “points” may be the deciding factor between yes and no.

Not to completely contradict what I said in the last paragraph, but an affinity credit card for BIDMC actually sounds like a much better idea. The personal incentive is removed in this case, so I wouldn’t think people would abuse its use just as they would with a “points” credit card. A program like this would give employees and patients who are already loyal to the institution a way to give back.

I’m no expert on the matter, but the post you made yesterday on hospital advertising definitely made me think about this.

I see this as a different opportunity (a hybrid to what you have mentioned already)

1. Patient goes to BIDMC2. Because of Incentive/Loyalty plan patient buys $100 of Gift shop purchases which can be used towards... - a gym membership - nutritional counseling - other opt-in fee based services3. Through a loyalty program BIDMC has a broader view of the patient and services they are using which could help provide better overall care for the patient, measure adherence to lifestyle changes/coaching, etc.

What is the current model for Joslin, New England Baptist and BIDMC in terms of their affiliated with the Dedham Health and Athletic Complex??

Being in Web marketing myself, and with some background in loyalty-based marketing, I think I see a couple of sides of this.

I have nothing against promotions per se - bottom line, any "points back" program is the same as a sale. Some people respond crazily to such offers - Discover Card has had a field day with this, charging a higher rate than other cards and then giving a small fraction of it back to the consumer. In the end the consumer pays more and loves it. Go figure.

Anyway: the first thing that struck me about the Paquin proposal is the potential for abuse, even unwitting abuse - people running up charges to boost their "miles." The fix for that: a firm policy that you get points *or* insurance for any given expense. (You're welcome to spend your own money on any incentive you want, but you don't get reimbursed for it.)

Otoh, from a marketing perspective, it sure would risk making a hospital look cheesy.

I get really irked when I talk to a provider or insurer about some expense and the person says "But it doesn't matter, does it? The insurance will pay for it."

p.s. Tom, from one e-marketer to another, my 2c worth is that a blog comments section is not an appropriate place to pitch yer stuff. :-)

If the patient can earn something of value for using hospital services covered by Medicare, Medicaid or private health insurance, then this scheme certainly sounds like a kickback. My guess is that this will not get past hospital counsel.

Paul, this seems to be a logical free-market step in medical consumerism. The medical tourism business combines vacations and surgery. As healthcare and well-being continues to take an increasing share of disposable income, there will be competition for the revenue.

My organization is a client of the Paquin Group and we have yet to see any benefit or improved revenue stream from their loyalty programs or services. The loyalty program is for retail purchases, not health care services. But still, smoke and mirrors.

As an industry specialist and a doctor, I can offer this forum some light. There is always opportunity in retail & plenty of opportunity in healthcare. If patients and their families have the desire and are purchasing health-related products somewhere, it might as well be where they get their care. As a CEO, you can either open up to this new margin or allow it to keep going to Walmart. The difference is that in our hospitals we can very much control the "tack factor" and guide our patients in a meaningful way. The rewards program is a comfortable and familiar connection for today's consumers, or in this case, patients, to participate in. From a CRM standpoint, it satisfies what every customer and patient expects - commitment. The doctor/hospital commits to the patient to reward them for an appreciated purchase, and the patient has committed to the doctor/hospital - a trusted source for health and, of course, health products. In short, I am in full support of this strategy and understand that all new ideas take time and the financial risk is so small it is negligible compared to other expenses or marketing efforts.

How about a loyalty program for children that gets them into the habit of building a PHR? In order for the EMR to be effective, we need to educate our children on the benefits of keeping records of their health online in the cloud. This could include weight management, immunizations, health education, etc. Why wouldn't a health system want to start promoting this type of program?